Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Federal Reserve Internal Survey: ‘Will Beatings Continue Until Morale Improves?’

Posted by Larry Doyle on August 28, 2013 10:16 AM |

The Federal Reserve has to be one of the single most opaque institutions not only in our nation but in the world. I often think of the Fed as having a door in which those inside can see out, but those outside can never see in.

In light of this premise, I am exceptionally surprised to read of a recent survey of Federal Reserve employees that is highlighted by The Huffington Post

Regulators overseeing the nation’s largest financial institutions are distrustful of their bosses, afraid to speak out, and feeling isolated, according to a confidential survey this year of Federal Reserve employees.

The findings from the April survey of roughly 400 employees, presented to Fed staff during multiple meetings in June and July and obtained by The Huffington Post, show a workforce that is demoralized, and an institution where teamwork is nonexistent, innovation and creativity are discouraged and employees feel underutilized.

Obtained by The Huffington Post? That is far different than “provided” to The Huffington Post. Do you get the sense that perhaps a disgruntled employee leaked this survey?

The shaky morale is a legacy of Alan Greenspan’s 19-year term as Fed chairman. From 1987 to 2006, the Greenspan Fed pushed for a hands-off approach by regulators, who then found themselves blamed for the financial crisis that led to the most punishing economic downturn since the Great Depression.

Sounds like Alan was little more than a benevolent despot with an outsized ego. No doubt he was also deeply in bed with the industry.  And Larry Summers — also a charter member of the Outsized Ego Club — is going to change this culture? Really? NOT.

“Supervisors during the Greenspan years were beaten down pretty regularly,” Phil Angelides, former chairman of the congressionally appointed Financial Crisis Inquiry Commission, told HuffPost. “It doesn’t surprise me that you would still have some dysfunction, a lack of morale and something less than a highly energized and well-coordinated arm of the Federal Reserve, where for so long the regulators and bank supervisors were held back by the leadership of the Fed.”

This comment by Angelides answers the question posed most recently by regular reader Fred as to whether the Fed is the great facilitator of the Wall Street-Washington Incest. Indeed it is.

Can the blankets covering up our pols, bankers and regulators be pulled back so that the incest can be exorcised and our nation might recover? Don’t hold your breath.

About a third of workers surveyed in the policy unit agreed that it was “safe to speak up and constructively challenge things around here,” documents show.

“That tells me you don’t have the culture of debate and engagement that you need so that questions are asked,” said Angelides.

What do I take from this survey and especially this last component in which only a third of the workers feel it is safe to speak up? Power and money once entrenched are not easily dislodged and the truth takes a back seat to the corruptible status quo.

Navigate accordingly.

I thank the regular reader who brought this story to my attention.

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog and comment on this piece of ‘sense on cents’.

Please subscribe to all my work via e-mail, an RSS feed, on Twitter, or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved. 


  • Barry

    They So Stink…maybe you saw this but just in case,

    By Joan McCullough, East Shore Partners

    Let’s just cut to the chase. They so stink, it’s beyond the pale.

    It was the middle of last night. I’m diggin’ around, readin’ here and there. When I come across this B’berg article: “FED Officials Rebuff Coordination Calls As QE Taper Looms”. By Simon Kennedy, Joshua Zumbrun and Jeff Kearns.

    This is a must read. Meanwhile, here’s the gist: At Jackson Hole, more than one emerging market honcho expressed concern regarding the possibility of his respective country’s demise as the FED hints about cuttin’ off the loose juice. All the reasons we have cited previously in this space, i.e., the spectrum of nasty fall-out to these emerging economies (formerly known as “Third World” was expressed; I said “formerly” … for the time being anyhow) … not the least of which is the aptly-named “fast money’ doin’ what it always does: exit in a hurry. Leaving these poor slobs in the lurch on many levels, big time.

    The response from the FED geeks cited in the piece: Tough noogies. Every man for himself. Our mandate is only applicable to maintain the health of the US. Go fish.

    Best response to that baloney cited in the piece: From Christine Lagarde, head of the IMF. “Watch out that your arrogant response doesn’t go full circle … and come back to ite you on the bass.”

    Like I said, that’s the nutshell. It is definitely a must read.

    By the time I got done with the article, I was jumpin’ furious.

    So now it’s time to Go to the Video, for those who either weren’t here yet (whippersnappers) or those who may need a reminder (aging dinosaurs). As to show how this infernal game has rolled and keeps rollin’. Much to my enragement.

    The bottomline is that these sunzabees are ruthless. Bullschmitt rolls off their tongues way too effortlessly. And I for one, have had enough enzyme free donkey fazoo shoveled my way to last two lifetimes. Their arrogance is unexampled. And it is clear that they labor under the delusion that we all have amnesia. And are way too stupid to see thru their crap.

    Tough noogies indeed. Every man for himself, eh?

    Do you get the picture? Great. Now let’s take these bums apart, inch by inch. I’m writin’ most of this off the top of my head. My memory gets real sharp when I get berserk.

    Here it is:

    It is the Mexican peso crisis of 1994.

    What really happened is that the Mexicans lied about how much they had left in dollar reserves; they had been defending the peso. As it was under siege.

    And although they swore up that they would not devalue, bang, they did it.

    Their Treasury market (Tesobonos and Cetes) as I recall, seized up. Who was trapped, holdin’ Herman and a lot of Mexican paper? Some of the biggest US institutional accounts.

    What did we do?

    Trader Bob Rubin, then Secretary of the Treasury, conspired with the head of the FED, Alan Greenspan, to raid the Exchange Stabilization Fund. Which had been established under Roosevelt to stabilize the buck. Under so many guises, not the least preposterous one being Rubin’s claim that stabilizing the Peso would stop illegal border crossings, we sent taxpayer do-re-mi into Mexico. Which provided a much-needed exit for those US institutional investors who needed it.

    Greenspan testified before Congress, the day I threw my shoe at the TV screen in the trading room, that he had “no record of the route the US funds took once delivered locally”. This was the truth. It was what this bamboozler didn’t say, that was critical. And since Congress was too ignorant to ask the next logical question once he said “I have no record”, a good leather pump went flyin’.

    What was that next, logical question? “If you don’t have the records, who does?” And the answer, natch, would have been, of course “THE FREAKIN’ MEXICAN CENTRAL BANK.”

    Of course, we never got to that point. The dopes in Congress were satisfied that Magoo didn’t have the records. And gave this fibber a pass.

    And so went the taxpayer money, down south. Then back up north. And the illegals kept swarmin’ the borders. But Rubin was nowhere to be questioned about his baloney. SOS.

    Nevertheless, we knew what the excuse was for raiding the ESF right off the get-go because Rubin had repeated it so often: In stabilizing the Peso, we stabilize the buck. Due to the cross-border investing, this is a given, i.e., it is in our best interests to prevent a crack-up over there … in order to prevent reverberations being felt over here.

    What you probably don’t recall as vividly is that back then, there were in effect some regs regarding the amounts that could be released from the ESF before Congress had to give its approval. I believe the magic line in the sand was a cool billion $. And that’s part of the reason why we had all the hearings at the time. Because Congress, as you know, is supposed to control our purse strings. As part of the system of checks and balances. I know. That became a joke under Obama. Nevertheless, it’s still on the books. So plod on we must with this tale.

    We are January of 1995 now. Clinton is in the WH. Monica is still under the desk, so Bubba still has clout. Greenspan/Rubin told him to ask Congress for $40 bil in loan guarantees for the Mexican government. Get it? They issued the cetes that these big US institutions were trapped with. So why not give them loan guarantees, eh? Smart.

    Congress said no.

    Which should have put an end to the whole thing. But Clinton defied them and gave Mexico $20 bil. Now remember, $20 bil was a lotta’ do-re-mi back then. And for the record, was the largest slug the ESF had ever even thought about dolin’ out.

    So tempers were flaring in Congress. Not only because Clinton et al had flipped them the bird, but because of the size of the guarantee. As I recall, $20 bil was roughly half of the whole stash in the ESF.

    To shut Congress up, Clinton cited Roosevelt or some baloney. Because apparently under the Gold Act of 1934 … yeah, that abomination … Clinton claimed he had discretion. (So why didn’t he just use it instead of going thru the motions? Right. )

    Okay, where’s this goin’? To make the point that back during the Mexican crisis, we made it plain to all, that taking steps necessary to stabilize other countries where US investors are heavily exposed … is in the best interest of the US.

    So, okay, that is the job of Treasury, right? What has it got to do with the FED? Greenspan and Rubin sat shoulder to shoulder at those hearings. The sight was much written about at the time. I clearly remember it and was taken aback myself. As they did nothing to dispel rumors that they had put their heads together on the Mexican bailout. And why would Treasury act without the FED’s counsel anyhow, right? It is the FED which does the transfers and oversees the financial system. So the FED gets no pass on this one. Ever. Cahoots 24:7? You bet. Keep readin’.

    What was happening before our very eyes was the resurrection of the ESF. Where many that day in the trading room where I sat, had never even heard of it. Some guys sittin’ upstairs, too, were equally givin’ it the “ES… what?”. So you get the picture.

    Thus, the ESF was resurrected and then stood on its ear.

    As follows: We morphed from promoting, starting in the 1930s, occasional, quiet, clandestine efforts to maintain the stability of the buck. Period. To a new, broader mandate which required us to keep orderly exchange agreements with our counterparties by stabilizing any and all foreign exchange rates. See the difference? The original intent was to keep the buck on an even keel. The New Age of Rubin expanded that to mean that we had an obligation to keep other country’s money balanced. So that ours would not be rocked and thus go haywire. Which would upset the US economic applecart.

    And that’s how they got away with all that carry-on almost 20 years ago. By disguising a bail-out of some big institutions as “Mexico’s interest is our interest.” And we never objected.

    So Rubin took it further.

    We are now in late 1997. Around Christmas.

    S. Korea was blowin’ up. So Rubin had dinner with Greenspan. Again. And the various aides. In order to figure out a way to solve this latest crisis.

    What had been happening in the lead up to this dinner? Asia was goin’ down the rathole. But Rubin, still chafing from criticism over the use of the ESF in the Mexican caper, kept a distance from these countries, opting to deem them as local annoyances and not critical to the US economic miracle.

    Unfortunately, it just kept gettin’ worse until it threatened to [de]stabilize the whole area.

    Let’s be more specific about that. Thailand and Malaysia aside, S. Korea had paper all over the globe. And they were on the brink. And Japan … was one of their biggest investors, holdin’ huge S Korean debt. For the record, at the time, they were high on our list of trading partners, too, about #5 or 6. And as you know, we have thousands of US troops stationed there as well.

    So he could no longer ignore this stuff.

    Because by now, the world of derivatives was starting to unfold to where it was a word heard on the 6 o’clock news by most of America.

    What was the deal, then?

    It would have been hard to find a country, large or small, who didn’t hold S Korean investments. So the US would have gotten banged by a S Korean implosion … either directly or indirectly.

    And since Japan … a major world economy … had the biggest exposure, it didn’t take too much of a stretch of the imagination to see how once the derivatives and interest rate and currency swaps and forex contracts and other sundry hedges got dragged into the vortex, that it would only be a NY minute before their crap landed on our sunny shores.

    The US was not quick to figure this out. I remind you who was Deputy Treasury Secretary at the time: Larry Summers. Yes. One and the same.

    He was dispatched to find out how much reserves S Korea had left. The old story, right? How many bucks do you have in the vault, eh?

    Apparently, it wasn’t much. So behind the scenes … and using the IMF as the beard, the US cobbled together a $75 bil bailout package in the form of loans to S. Korea. Attached to these loans was a message from Trader Bob delivered by the IMF to S Korea: drop your trade barriers and rebuild your financial system. Which was a joke. Because a handful of families/titans controlled the whole magilla, employing a huge chunk of the population to boot.

    That was in early December when the IMF cut the package for S. Korea with us pushing behind the scenes. Early December of 1997.

    But it didn’t work, no sir. As much as Clinton tried to downplay it, it didn’t work. And S Korea kept hemorrhaging reserves as the foreign money couldn’t get out fast enough.

    And that, ladies and germs, is what precipitated that Christmas-time dinner between Rubin and Greenspan.

    It is noteworthy that by this point, the Japanese stock market was gettin’ drubbed mercilessly. And fingers were being pointed. And the DJIA then started to lose ground. The rumors were ceaseless and went something like this: If the US doesn’t stop the mess unfolding in S Korea, then directly and indirectly, they are gonna’ take the US economy to its knees. As Asia in general was a total mess; US earnings in the area were in jeopardy. Got that? US earnings in the area were in jeopardy. And S Korea’s reserves by then were estimated to be under $10 bil; Mexico had about $6 bil left when they pulled the trigger. So it was a matter of days before S Korea did the same.

    The IMF kicked into gear and demanded more funds from the US. Which we kicked in. Disguised by further commitments at the time from Germany, Japan and the UK and probably others who had exposure, too.

    How did this work out?

    McDonough was Chairman of the NY FED at the time. He got on the blower and asked all the big banks to roll over their loans to S Korea.

    And very importantly, asked them not to execute margin calls on any derivatives and such with S Korean entities that had gone south.

    Having no choice in the matter, apparently they complied.

    That’s the gist of what happened. After that stuff, there was a load of political carry-on as the S Korean unions got involved and there was a power struggle at the top of their country’s leadership.

    But you get the point. You see the extremes that we went to … and the taxpayer money that was put at risk to becalm a financial crisis … away from these shores. In the process, we ended up financing the government/ large business entities of a foreign country which the US said was strategic to the continued success of the US economic miracle.

    So what’s the difference if we send money to foreign shores to stop the hemorrhaging so that it doesn’t reach us? Or if we acknowledge that having printed money and caused those foreign countries to be at the whim of fast, free do-re-mi … we now put them in jeopardy by our withdrawing same?

    We did it in Mexico. We did it in Asia. We saw them nearly implode once the hot money started to leave big time and saw that this would cause us problems. So we took action to defend ourselves.

    Why now, are they denying this reality?

    Just plain stupid? Or is there a method to the madness? Such as they see that they have created such a horrific, no exit mess as the result of QE Infinity and ZIRP, that they must now pretend that US policy has always been “every man for himself”? When we know that this is blatantly false?

    I’ll be giving this poser some more thought including how the Nikkei and then the DJIA followed suit and why. Way back then. Suggest you do the same.

    Like I said, they so stink.


Recent Posts